Topic: [ANN] Tangible Cryptography, LLC files for registration as MSB (Read 6831 times)

I was told that if your profits are in BTC your not acting as a money transmitter??...

I think your lawyer is 100 percent correct in his advice and anybody in the 'business' blatantly ignoring such advice is a fool.

All I know is that our attorney for my FinCEN-registered MSB advised me after the Bitcoin Conference to stop selling immediately, in spite of being registered with FinCEN and having a great compliance program.  What he took away from the conference, the other attorneys he spoke with, and some of the panels was that unless you have the resources/funding available to register with whichever states you want to trade in, you will run the risk of prosecution.

But that's just our attorney.  It is quite possible that TC's team has found some better way to continue selling bitcoins in accordance with even the state laws (meaning that they operate in a way that doesn't define them as money transmitters) ... so I'm not sure anyone here can pretend to know TC's situation, legally speaking. 

What I can say is that TC is intelligent, dedicated, and has a good team to help him figure out how best to proceed.  Since my own btc company is now closing its doors, I can only hope that TC finds a way forward where the rest of us were not able to.

This is all to say to Viceroy that it's not really your place to judge here because none of us know all of the details here, and if anything, we should be supporting and encouraging those companies still operating because if we all have to shut down, that will be a sad day for many of us bitcoin enthusiasts!

That made me cringe.  Are you a lawyer?  Me thinks you have no idea of what you speak if thou thinkest this.  (Hey readers, you want another story?  Read the article about "Inaba's Con" in my signature below.... it's one heck of a story... the kind of thing that is so frightening you can't even make it up).

Clearly Tangible Cryptology is doing everything right.

Viceroy I have no idea who you are what you do except my first impression of you as some dude on the internet with a bad attitude.

However if you are another bitcoin business or just a bitcoin proponent I don't understand what you are getting out of this attack.

Many bitcoin businesses and individuals are talking and working together to as an industry to help understand what this regulation means to us all.

And for what ever you think of the Bitcoin Foundation, a number of the largest bitcoin players have banded together and for better or worse (I'm not going to debate that [yet]) to help guide the industry forward and to hopefully effect future regulation and legislation.

And I'm sure you have many responses that that so anyway....

Proof or it never happened, stop the FUD.  And btw attacking me doesn't excuse your flagrant abuse.

What one regulator thinks might be the case stated in an unofficial (and thus not legally binding) email doesn't make it case law.  No state (or country) anywhere has issued anything formal indicating Bitcoin is treated as a commodity for regulatory purposes.  As I pointed out commodity dealers are generally LESS regulated than other financial institutions but until that happens it is meaningless.  


Neither the article nor the complaint (have you actually read the complaint) indicate that the dual nature of transactions suddenly made prosecution possible when a single direction business would have been compliant.  That is just your flawed analysis (and I use the term loosely).  

No doubt they are and I am happy to discuss it with them.  [email protected] it still doesn't make your posts any more meaningful.  Why don't you do something useful like register your virtual currency exchange business with FinCEN.

You haven't done anything to comply with the law.  You stated you regularly exchange Bitcoins for profit outside of registered exchanges and thus you by FinCEN guidelines are an "exchanger".  To date you have no registered with FinCEN.

Still you have "helped" enough here.  I am sure you will now go "help" every other Bitcoin related business on the planet that has US customers.   I am sure they will all appreciate your help.

I sent you what the regulator said but you refuse to deal with my pm's.  Ask any state for their official position on "is bitcoin a commodity" and they will happily confirm what I said.  Start with New York, it will be VERY VERY clear when they tell you that they believe bitcoin is a commodity.


I don't have a 'stick up my butt' about TC.  I have concerns about regulations.  Unlike the guy you clearly admire above I am trying to stay WITHIN the framework of the law.  It is abundantly clear from my post at the top of this page that TC is probably in trouble per NY state's laws.  Don't worry about me, worry about your own activities.

Thank you BCB.  As an "outsider" your insight is spot on.   We have taken steps to comply with existing regulations.  We have in the past (and will continue to in the future) prevent the exchange of virtual currency we know are the result of illegal activity.  One may wonder how we might know and the reality is sometimes people tell us.  Not really sure why they do or why they think it is a good idea but they do.  Since registering as a MSB we are also required to file a SAR if that happens and we will comply with the reporting requirements.  

You are right that we do not transact in cash, or cashier's checks, or negotiable (i.e. check made out to "cash") instruments as that complicates KYC and AML requirements.  We limit clients to directing the proceeds to accounts under their control and prohibit (and actively police) third party transactions.  We use existing banking (and pseudo banking structure like PayPal & Dwolla) as those accounts are already required to be KYC & AML compliant.  We are working with a banking partner to allow us to authenticate bank accounts once we restart ACH & Wire service.  It is all tedious, boring, and time consuming but we do it because while we feel that while OTC is important many people just need an easy and trusted way to buy or sell Bitcoins.

Lastly I would say regulation and compliance is a moving target.  I am sure state regulators will move to expand their laws (or provide guidance similar to FinCEN thus defacto creating new law) it is only a matter of time.  If necessary we will modify our procedures and as a last resort restrict transactions involving certain locations.

Viceroy,

You are not a regulator nor a state or federal legislator (or are you??) so it does not matter what you "see" or think.   Legitimate business have attorney's and advisers to help them navigate this uncharted path and if they want to stay in business they will comply.  Others will close or be shut down.

I can't imagine that every legitimate bitcoin business (including bitinstant) is not scrambling to understand what the recent FinCEN guidance, MT GOX action  and/or additional regulation/legislation may mean for the future of their respective businesses.

For many of the bitcoin businesses this was THE topic of conversation at the recent conference in San Jose.

Regardless, TC is one of the good guys.  Why don't you go troll one of the many BLF threads, or better yet drive down to Texas and see if you can track down Trendon Shaver or something else useful.

Can't imagine why you have a stick up your butt for TC except that you are envious that that he is building a trusted, well-regarded and successful bitcoin business.

Once again there is no "magic" both sides means you are this vs one way transactions means you are not.  Please cite law or regulation to back up your claim.  

Your belief that bitcoin is a commodity in most states runs contrary to all legal advice (not just from our own counsel) but everything reported and presented to date.  Bitcoin is almost certainly not considered a commodity.  Honestly if it WAS a commodity it would make regulation and compliance much clearer and simpler.  Hint:  if Bitcoin is a commodity then FinCEN guidance on MSB licensing is invalid as commodity dealers as NOT Money Service Businesses.  Just because one functionary in an email told you he thinks Bitcoin might be a commodity doesn't make it case law.

As for "cutting off" certain states that is something we are currently in talks with counsel about.  There are at least five states where the laws are vague enough that prosecutor could make the case that Bitcoin falls under the definition.  We have sent letters requesting clarification and if necessary will drop those states.

You are suppose to register as a MSB as your self described activities include the regular exchange of Bitcoins in a for profit venture but since you don't follow your own advice why should anyone take anything you say seriously?

You may be correct although bitcoin is probably a commodity in most states.  The OP would do well to cut off NY and Texas IMMEDIATELY.  The problem as I see it is that the OP deals on both sides of the equation and as such they are required to be a money transmitter per the link on the first page to the ny presentation.  


The OP needs to take a lesson from bitinstant and get licensed as a money transmitter in each state, though it may be too late even for bitinstant at this point.  You are supposed to register and THEN trade, not the other way around.

The recent FinCEN guidance states that any bitcoin business that buys or sells bitcoin for non-personal use (my interpretation and IANAL) must register with the Financial Crimes Enforcement Network (FinCEN) as a Money Service Business (MSB).  

FinCEN is a Federal regulatory agency within the US Department of Treasure entrusted to aid law enforcement in the fight against Money Laundering and Terrorism Finance as per the Currency and Financial Transactions Reporting Act of 1970 which was amended by the USA PATRIOT Act in 2001. A legal framework with falls under the broad umbrella of the Bank Secrecy Act (BSA).

The two most important functions of this regulation are Know Your Customer (KYC) an Anti Money Laundering (AML) regulation.

To my knowledge TC only accepts bank wires for his business.  To send or receive a bank wire you must have a bank account.  And if you have a bank account in the US you know the kind of documentation required. So I doubt there is much anonymous activity going on in his business  TC also has limits on the amounts of funds you can send and receive (I'm assuming as per this guidance).  

I believe payout options also include paypal, dwolla, etc who are also regulated not only by FinCEN but also by Money Transmitter (MT) laws and regulation which provide  consumer protection for citizens of each state in which a MSB has clients.  Which again links these funds and their transfer real people.

To my knowledge NO states except possibly Texas and (depending on your interpretation) possibly New York currently requires a bitcoin business to be licensed in their states.

I am in no way associated or affiliated with TC (but I have used there EXCELLENT and PROFESSIONAL service on a few occasions) so again I would assume that TC is currently complaint with any existing regulations (however gray this area currently is).

Now FinCEN, The Department of Treasury and/or the State may and probably will rule further in this area, but until then, I don't see any reason why TC would be operating illegally.

However the bigger problem for bitcoin businesses and obviously for Liberty Reserve is that it does not matter if regulation applies to a your business because federal criminal laws apply (as we see with the LR case) which prohibit anyone from not only being involved in the movement of the proceeds of criminal activity but also aiding this movement or ignoring the potential source of such proceeds. (SEE E-GOLD)  

As we have seen in the LR case and as we may see in the pending MT Gox case, this gives law enforcement discretion to prosecute criminally.   And since bitcoin businesses are potentially open to abuse from money laundering and other financial crimes, they may now become  targets for prosecution if these businesses enable this type of activity.

What this does mean is that to operate legally,  bitcoin business will be required to abide by these developing regulations (which it seems TC is doing) and the biggest impact will be the end of anonymity in (the regulated) bitcoin economy which is probably not a bad thing.
 
And after all the hacks and scams and financial fiascoes we have seen in bitcoin, if there is one business I see leading the way it is Tangible Cryptography.

just my 2c.

I guess you prefer dealing with criminals, huh goat?

Does it make it easy to wash all those BTC you claim to own?

There was an article published yesterday about the founders of Liberty Reserve being arrested for money laundering.  As a non-lawyer I'll let you read the pertinent parts and then decide for yourself if Tangible is required to be licensed as a money transmitter, which clearly they are not per the operators post above.

From the article:

According to records from the U.S. Justice Department, on July 27, 2006, Budovsky and a partner identified as Vladimir Kats were indicted by the state of New York on charges of operating an illegal financial business, GoldAge Inc., from their Brooklyn apartments.

They had transmitted at least $30 million to digital currency accounts worldwide since beginning operations in 2002.

The digital currency exchange, GoldAge, received and transmitted $4 million between Jan. 1, 2006, and June 30, 2006, as part of the money laundering scheme.

Customers opened online GoldAge accounts with limited documentation of identity, then GoldAge purchased digital gold currency through those accounts; the defendants' fees sometimes exceeded $100,000.

Customers could choose their method of payment to GoldAge: wire remittances, cash deposits, postal money orders or checks.

Finally, the customers could withdraw the money by requesting wire transfers to accounts anywhere in the world or by having checks sent to any identified individual.

Budovsky and Kats were sentenced to five years in prison for engaging in the business of transmitting money without a license, a felony violation of state banking law, but got probation.

---

Now I'm not a lawyer and I don't give anyone legal advice but it sure looks to me like the guys who got arrested do exactly the same thing as the OP.


1) LR "transmitted at least $30 million to digital currency accounts", fastcoins transmitted $500k just last week alone per this thread.

2) LR "digital currency exchange, GoldAge, received and transmitted $4 million", fast coins buys here and sells here

3) LR "Customers opened online GoldAge accounts with limited documentation of identity", fast coins offers accounts with limited identity.

4) LR "Customers could choose their method of payment", fast coins does the same

5) LR " withdraw the money by requesting wire transfers", fast coins offers the same


When I reported this information to the OP in PM he responded with this:

Re: (No subject)
« Sent to: Viceroy on: Today at 03:57:53 PM »
Your help is neither wanted nor needed.  Please stop.  It gets annoying to have our company PM inbox blasted with your nonsense.  I tried explaining, I tried ignoring.  Now I am being direct.  I am directly asking you to never PM this account again.  If you do I will ask the mods to consider it spam.

Thank You,

Staff

Tangible Cryptography

---

Well, D&T, I guess we'll be finding out if you are actually Satoshi soon enough... when your name comes out in the paper.

We are not going to discuss legal opinions on a internet forum.  There are more relevant threads on the issue.  You are free to spam the thread all you wish but it isn't going to have any effect.

Thanks for bumping.  Come on D&T talk to us....

As a consumer I just sent my home state of Colorado a bunch of questions about "crypto currency" regulations and if they have any.  I'm happy to report my findings.

See here... good luck, these regs need to be overhauled but this is what you will likely deal with

https://bitcointalksearch.org/topic/full-picture-on-us-msb-regs-state-and-federal-200443

I agree with this, you would be well advised to speak to your counsel.  My limited understanding is that fincen registration flows down to the state level as well.  There are some other threads discussing the subject in more detail.

The reason is that if you receive dollars you are storing value which may be transmitted at some time in the future. 

Bumping my previous question and adding... you might want to become a money transmitter after all given the new interest from the fed:
http://arstechnica.com/tech-policy/2013/05/feds-reveal-the-search-warrant-that-seized-mt-gox-account/

From: http://bitcoinmagazine.com/fincen-bitcoin-users-not-regulated-exchanges-are/

"Fortunately, payment processors such as BitPay are exempt. BitPay is legally classified as a payment processor, not a money transmitter. Gallippi points to 31 CFR § 1010.100(ff)(5)(ii)(A)–F, a set of FINCEN rules which clarify that “the term money transmitter does not include a person who only … (ii) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller.” Becuase BitPay deals financially only with sellers, CEO Tony Gallippi explains, and not with customers, BitPay is in the clear."


Doesn't that apply to you as well?  You don't sell bitcoin, do you?

Tangible Cryptography is registered as a MSB with FinCEN it is not registered as a Money Transmitter in any state.  No state entity as of yet defines the exchange of virtual currency as Money Transmission.  It may only be a matter of time but that time has not arrived yet.

So you filed the FINCEN application but you have not become a Money Transmitter in any state, correct?

FastCash is a brand name, the legal entity is Tangible Cryptography, LLC.  It is incorrect to say "federal version" as if they are equivalents.  Recently FinCEN expanded their guidelines to include virtual currencies at this time we are not aware of any state updating their regulations related to virtual currencies.  We will register will relevant authorities if and when necessary.

How many states have you guys registered FASTCASH in or did you just do the Federal version?

I am a U.S. citizen living in Florida. My bank is a U.S. bank chartered in Florida. You have disabled ACH to my bank account. Why?

Pretty cool! GLWI.

There are new guidelines from the Department of Treasury's FINCEN unit... the Financial Criminal Enforcement Network and anyone in the US who is trading commercially in bitcoin (acting as any sort of exchange) would be wise to do the same.   The US government is VERY serious about money laundering and that is the issue at hand.  What is about to happen is all the wannabe's are about to disappear and only the few strong enough to pay tens of thousands of dollars in registration fees (to start) will be players in the fiat->btc->fiat business.

For FC4B, do you accept international customers that will take a Company Check as payment?

True but we have no interest in the complexity of maintaining those records.  For the time being we will simply bypass the issue by not wiring funds out of the country. 

What is needed to ensure that international bank wires are not going to Americans? Or the account holder is not an American? Can I give documentation to prove that I am not an American, therefore you can send me an international bank wire?

If we have a foreign passport or foreign birth certificate, should that not be enough to prove status as not American in foreign land?

You are stopping cash deposits because no one understands the law or guidelines using it with bitcoin or no laws or guidelines exist for the use of cash deposits to buy bitcoin? If no such law or guideline exists, then it is not unlawful to continue doing it? Just curious since that was the preferred method I used. Thanks.

Tangible Cryptography LLC has filed with FinCEN for registration as a Money Service Business (MSB).  In light of the guidance from FinCEN released last month we have taken steps to become compliant with the regulations imposed on "virtual currency exchangers".  On the advice of legal counsel, Tangible Cryptography filed for registration as a MSB.  Even prior to FinCEN guidance management at Tangible Cryptography concluded it was a matter of when not if Bitcoin related enterprises would be subject to regulation.  Our policies and procedures put in place over the last year have been designed to make this transition as easy as possible.  

What changes will occur with FastCash4Bitcoins?
At this time there are no changes.  On advice of counsel our existing procedures are sufficient to meet the regulatory requirements of a MSB.  It is important to understand that FC4B has ALWAYS prohibited third party transactions (Bob using FC4B site to pay funds to an account owned by Alice).  Users attempting such third party transactions face financial penalties (per our terms of service), closure of account and now under MSB regulations we may be mandated to report these transactions.  We have no intentions on allowing third party transactions and the overwhelming majority of our users understand and respect this.  We have designed our site, and payment methods to be compliant with FinCEN guidelines.  Third party transactions remain prohibited on FastCash4Bitcoins and in the future once our registration with FinCEN is complete these prohibited transactions are likely to cause further issues for users involved.

What changes will occur with Bitcoins Direct?
We are no longer accepting cash deposits effective immediately.  The MSB regulations that FinCEN has imposed on "virtual currency exchangers" were never intended for this role, and they contain provisions which are nonsensical and at best vague when applied to a "virtual currency exchanger".  The reporting and identification requirements for currency transactions are one such area.  In this case "currency" is defined as the physical money of the United States, and foreign governments (to include certain certified instruments such as cashier's checks and money orders).  We have sought clarification from FinCEN and will avoid these types of transactions until we have better understanding of the requirements.  


As a user of FastCash4Bitcoins or Bitcoins Direct what do I need to do?
Nothing other than continue to use the sites as intended.  We have designed our services to ensure that we don't engage in transactions which require enhanced identification or mandated reporting (except in cases of willful abuse by the user).  If you use our services as intended (your coins sold to Tangible Cryptography for payment into an account in your name) you can continue to use our services as you always have.  We have specifically designed our services to ensure that a user would have to be willfully violating our terms of service to create a transaction (or series of transactions) which result in mandated reporting or enhanced identification requirements.  In the more than five thousand successfully completed transactions there have been less than a dozen which may have mandated reporting if Tangible Cryptography has been an MSB. All of these transactions involve a blatant and willful abuse of the system (and a complete lack of common sense).  Examples include accounts under a false name, single user with multiple accounts (27 to be exact), user sending bitcoins to multiple accounts (and notifying us when the transaction was delayed), user willfully creating accounts under another person's name (a law firm who had no knowledge of the transaction), user unable to complete a transaction because they did not have identification matching name on the check he requested, and user admitting of his own volition (without any prompting by our staff) that the funds in the transaction are the proceeds of criminal activity).  The bar for filing a SAR is generally pretty high and the setup of our service ensure you could not accidentally be reported as a result of a common mistake or misunderstanding.  

Why was bullion removed from FastCash4Bitcoins?
Bullion sales are not considered money transmission.  Given the reduced regulatory burden we will be processing bullion sales in a separate site launching soon.  Same great service and prices but under a new brand dedicated to bullion sales.

Why do you not allow international bank wires on FastCash4Bitcoins?
It is ironic that the reason we prohibit International Transactions is because we do not have the capabilities to ensure the account holder is not an American.  Certain provisions of FACTA require financial institutions to record transactions of Americans made to foreign accounts.  Without the ability to guarantee a client is not an American we have on the advice of counsel decided to limit our outbound transactions to US based banks.  This ensures compliance by default.  It is possible this decision will be changed in the future however there is no plan or ETA on that.

Are you going to report all my transactions to the government?
No.  MSB are only required to file reports under certain conditions.  The two most common scenarios are "suspicious activity" (as defined by FinCEN), and transactions involving more than $10,000 in currency.  In this case "currency" is defined as the physical money of the United States, and foreign governments (to include certain certified instruments such as cashier's checks and money orders).  Neither of our sites involve physical currency and the bar for suspicious activity is rather high.  The nature of our service and limited payment options ensure that the filing of a SAR would require a user to intentionally violate our terms and conditions.

http://www.fincen.gov/forms/files/fin109_sarmsb.pdf

If you file a SAR will you notify me?
Financial Institutions are prohibited from notifying an entity that a SAR has been filed or that their transaction may result in a SAR.  We have taken steps to ensure that no user using our service as intended could produce a transaction or set of transaction that would give mandate reporting under the definitions of "suspicious activity".  If a user wilfully violates our terms of service and engages in activity such as but not limited to the following we may be mandated to file a SAR:

• create transactions under a false name.
• open an account under the name of third party.
• announce, declare, or otherwise inform the staff that fund are the result of criminal activity.
• use multiple accounts with intentional mispellings of the users name.